Chapter Summary

All projects have some level of risks—just how much the project's stakeholders are willing to accept varies by project and organization. The quantification of the stakeholders' tolerance for risk is called the utility function: the higher the project's importance, the lower the utility function. Low-priority projects are generally more likely to accept risks than those projects that have a big impact on your organization.

Recall that at the launch of the risk planning process, there's the creation of the risk management plan. This plan addresses how the project's risk management approach will be directed. This plan is not specific to the risks within the project, but creates the boundaries, expectations, and general rules for the risk management process. Once this plan is in place and everyone is in agreement to abide by it, the project-specific risk management activities can commence.

The first stop is all about risk identification. This isn't a private meeting—the project team, the project manager, the project sponsor, vendors, stakeholders, end users, even customers can participate if it's necessary. Any project-relevant risks are accepted. It's good to have a variety of participants, as their point of view can help identify risks that may have been overlooked otherwise.

As risks are identified, the project manager can use the Delphi Technique to build a consensus on which risks have the highest impact on the project. This anonymous approach allows participants to speak freely about the risks, unhindered by the opinions of other stakeholders. The comments on the identified risks are distributed to all of the participants, allowing participants to comment, concur, or dismiss opinions on the identified risks. Through rounds of discussion, a consensus on the risks is reached.

Then it's off to quantitative analysis, where the risks' probability and impact are quantified. Specifically, the risk exposure for the project is tied to a dollar amount. The risk exposure is offset by a contingency reserve. Should risk events happen, monies from the contingency reserve are used to counteract the risk events. Ongoing monitoring and controlling of the risk events and their impact is essential to effective risk management.

Involved with all of these processes is the risk register. It's the project's journal and database of risks, their status, their impact, and any supporting detail about the risk events. As more information is gathered about the risks, the project management team updates the risk register. As the project moves past risk events, their status and outcomes are updated in the risk register. The risk register is part of the project management plan and becomes, once the project closes, part of organizational process assets for future projects.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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